Fraud-busting agency examines role of middle-men in winning engine contracts
in Indonesia and China

The Serious Fraud Office has launched a formal investigation into allegations of bribery and corruption at engine maker Rolls-Royce that could lead to criminal prosecutions.

Britain’s fraud-busting agency has spent more than a year examining claims from a whistleblower over Rolls’ use of middle-men in winning multi-million pound contracts in Indonesia, China and elsewhere, dating back more than 20 years.

Among the claims from whistleblower Dick Taylor, a former employee, was the allegation that the engine maker had handed a $20m (£12.2m) bribe and a blue Rolls–Royce car to Tommy Suharto, the youngest son of the late Indonesian dictator.

It was for his help, it was claimed, in persuading the country’s flag–carrier Garuda to buy Rolls’ Trent 700 engine for Airbus A330 aircraft in 1990.

Mr Suharto denied the allegation only last month in a surprise intervention.

In a brief statement on Monday, Rolls said: “Further to our announcement of December 6 2012 relating to concerns about bribery and corruption in overseas markets, we have been informed by the SFO that it has now commenced a formal investigation into these matters.”

Rolls disclosed a year ago that it had “passed information” to the SFO after a request from the agency for material relating to “allegations of malpractice in Indonesia and China”.

The company added at the time: “Investigations by Rolls-Royce have identified matters of concern in these, and in other overseas markets... It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company.”

Since then, Rolls is understood to have liaised closely with the SFO, making it clear that it would fully co-operate with the agency in its inquiry and reduce its use of intermediaries in contract negotiations. The US Department of Justice has also been made aware of the allegations.

A formal investigation was widely expected by analysts and Rolls shares rose 6p to £12.49.

News of the SFO inquiry could raise fresh questions over the departure in June of Mark King, the former head of its aerospace wing – Rolls’ biggest division, accounting for £8.85bn of last year’s £12.1bn operating revenues.

Mr King, who joined Rolls in 1986 and had been widely tipped as a future successor to chief executive John Rishton, was responsible for the civil aerospace division at the centre of the SFO probe.

Despite numerous opportunities to clarify whether Mr King was under investigation, Rolls has repeatedly refused to comment.

When his departure was announced in May, Mr Rishton would only say: “He’s had enough. He’s tired. It’s a very stressful job. He wants to spend more time with his family.”

A Roll’s Royce source stressed on Monday that the company would make no comment on any individuals involved in the inquiry.

Any investigation into Rolls could take years, judging by the SFO’s seven-year probe into allegations of bribery at BAE Systems.

Last month, Mr Suharto’s lawyers Elza Syarief wrote to SFO director David Green, saying: “For the record, an on behalf of Mr Suharto, we would like to state categorically that he did not, and has never, received monies or a car from Rolls-Royce and nor did he recommend their engines to Garuda. These allegations are false.”

The credibility of Mr Suharto’s denial was questioned in some quarters, however, given his conviction in 2002 for ordering the assassination of an Indonesian supreme court judge. He was sentenced to 15 years in jail but released after four.

An SFO spokesman would only say on Monday: “We confirm that the director of the Serious Fraud Office has opened a criminal investigation into allegations of bribery at Rolls Royce.”

Mr Rishton has made clear on a number of occasions that “neither I nor the board will tolerate improper business conduct of any sort and will take all necessary action to ensure compliance”.

In January, Rolls hired Conservative peer Lord Gold to carry out a review of all of the company’s business practices – similar to the one undertaken by Lord Woolf in 2007 into BAE. Lord Gold’s review is continuing.